To test for cutoff errors which overstate liabilities, the auditor should trace, to vendors' invoices, the receiving reports issued:
A)after year-end.
B)before year-end.
C)the last day of the fiscal year.
D)both before and after year-end.

Question

Quizplus · Accepted Answer

If the auditor traces receiving reports issued before year-end, it is possible that they will not be recorded in the accounts payable at year-end, resulting in understated liabilities. However, if the auditor traces receiving reports issued after year-end, any cutoff errors that overstate liabilities will likely be caught. Therefore, option A is the best choice.

To Test for Cutoff Errors Which Overstate Liabilities, the Auditor